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Credit woes deck Dow

Blue chip stocks trim losses, but remain bruised by credit fears at home and abroad; Nasdaq stabilizes after skidding at the start of trade.


NEW YORK (CNNMoney.com) -- Stocks tumbled and bonds rallied Thursday morning as renewed fears about global credit woes caused investors to dump equities and seek safer havens for their money.

Stocks were already vulnerable to a decline, however, following a robust three-day market surge earlier this week.

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The Dow Jones industrial average (down 162.75 to 13,495.11, Charts) tumbled by as much as 241 points, before paring losses to stand 92 points, or less than 0.7 percent lower.

The broader S&P 500 (down 19.04 to 1,478.45, Charts) index dropped 0.9 percent. The tech-fueled Nasdaq Composite (down 12.01 to 2,600.97, Charts) index, the strongest of the three majors since the open, managed to cut losses to 0.1 percent.

Fears about the subprime mortgage market and the credit crisis resurfaced Thursday after BNP Paribas, France's biggest bank, said it was halting withdrawals from three of its top funds because it can't value their assets in the current market.

Additionally, AIG, one of the world's largest insurance companies, warned Thursday morning that it is seeing mortgage delinquencies spreading from subprime to prime. The company also reported higher-than-expected quarterly earnings late Wednesday.

AIG (down $0.63 to $65.85, Charts, Fortune 500) lost 1 percent, recovering from a 5 percent plunge at the open.

Seeking to calm credit worries, the European Central Bank (ECB) added cash to money markets. However, the move seemed to have the opposite effect, adding to worries rather than easing them.

The ECB loaned at least $130 billion in overnight funds to banks at a 4 percent rate. The Federal Reserve added $24 billion to temporary U.S. reserves in its regular overnight operations, while traders were primed to see if the U.S. central bank would make additional money available.

A variety of U.S. financial stocks slumped, including Citigroup (down $1.76 to $47.73, Charts, Fortune 500) and JP Morgan (down $1.70 to $44.81, Charts, Fortune 500), but tech gainers such as Cisco Systems (up $0.63 to $32.31, Charts, Fortune 500) helped staunch the selloff.

In global trade, European stocks tumbled, while Asian markets finished higher.

Treasury prices surged in a classic 'flight-to-quality' move, sending the yield on the benchmark 10-year note down to 4.79 percent from 4.88 percent late Wednesday. Bond prices and yields move in opposite directions.

In currency trading, the dollar surged versus the euro and slumped versus the yen as traders struggled to reposition themselves amid the credit squeeze concerns.

Oil prices fell, with U.S. light crude for September delivery slipping 55 cents to $71.60 a barrel on the New York Mercantile Exchange.

Commodities across the board, with gold, silver, platinum and copper prices all down.

In corporate news, Dow component Home Depot (down $2.02 to $35.78, Charts, Fortune 500) said Thursday it was in talks with private equity buyers about lowering the sale price of its HD Supply unit from $10.3 billion and that it was reducing a previously announced tender offer, sending its shares over 5 percent lower on the New York Stock Exchange.

A variety of retailers reported less-than-stellar July sales.

Among the standouts, teen retailers Pacific Sunwear of California (down $1.55 to $15.68, Charts) and American Eagle Outfitters (down $0.66 to $23.18, Charts) both reported a drop in sales at stores open a year or more, a retail metric known as same-store sales.

Wal-Mart (down $0.94 to $47.48, Charts, Fortune 500) and Target (down $1.00 to $64.21, Charts, Fortune 500) both reported better-than-expected same-store sales. However, both stocks declined regardless.

In other news, Rupert Murdoch's News Corp. (down $0.11 to $22.69, Charts, Fortune 500) reported a rise in quarterly profit after the market close Wednesday, boosted by ad sales and its cable channels.

Market breadth was negative. On the New York Stock Exchange, losers beat winners nearly three to one on volume of 740 million shares. On the Nasdaq, decliners topped advancers by three to two as nearly 1 billion shares changed hands.

On the economic front, jobless claims climbed more than expected last week, the Labor Department reported, while the four-week moving average inched higher. Top of page